Investors Are Buying Your Dinner, But How Will They Trade It?

Most mainstream business reporting on the agricultural sector has recently focused on the socio-economic impact of rice shortages in southeast Asia or the global price spikes throughout the food chain. But despite the misfortune wrought by desertification, drastic weather changes and other contributing factors, those who trade on the commodities market have seen food shortages as a boon.

Companies that have already benefited from buying up wheat, corn or soy futures are beginning to invest in farm land (from the corn fields of Indiana to cattle ranches in Argentina), storage facilities (such as grain elevators) and fertilizer companies. An article in the New York Times proposes that this financial interest will stimulate food production, thus stabilizing the supply.

But what does it mean for the future of food, beyond the immediate crisis? According to a financial adviser who spoke to the Times, it is particularly lucrative for investors to purchase the tangible materials of food production because – unlike commodities stocks – they are not subject to strict trading guidelines. The guidelines are put in place to keep the agricultural industry from growing too volatile, but with the trading of materials underway, investors are changing their relationship to the agricultural sector.

With investments in farm land, crops, crop storage and crop transportation – truly each step on the production chain – comes a responsibility to ensure that food is produced and delivered. In this scenario, investors take on some of the responsibilities normally ascribed to farmers, when in fact their primary interest is maximized profit. When we complain about corporate farms today, we complain about the profit-mindedness of large scale farmers. Imagine the consequences to our food supply if a large subset of our producers are professional profit-minders and not farmers at all.

But there is another issue at hand: the environmental impact of increased interest in agricultural investment. We have discussed the shortage of viable agricultural land on this blog before. With lucrative deals attached to what remains, how will we be able to protect forested and other natural areas from being converted into farms?

My understanding of economics is woefully short of what I would like it to be and so I invite the explanations and ideas of financial analysts in the comments section, but I must say that – as a lay person – this sort of large scale investment in agriculture beyond the strict confines of commodity trading worries me. What does it mean for our food supply and for the natural world around us? With investors’ interests skewing toward traditional agriculture, what will happen to the financial viability of innovative food production technologies?

Photo Credit: Bob Jagendorf under a Creative Commons License